I.

Introduction

Prices, in economics, value of things measured in terms of what the buyers in a market will give in exchange for them. Prices are usually measured in money—indeed, money's effectiveness as a medium for expressing prices is the main reason for its existence—but in barter systems prices could be expressed in other commodities with their own value, so that prices of all commodities were mutually determining without the intervening medium of money. Prices are the fundamental mechanism of adjustment of supply and demand, for any commodity in a free market economy should eventually find the level at which production and consumption are balanced: this equilibrium price will be the compromise reached between what the producers can afford to charge and what the consumers are prepared to pay. Prices will therefore decide what and how much is produced, how it is produced, and who can buy it. Questions of price are therefore crucial to economics, particularly microeconomics, and the subject of intensive study.